Historical Performance of the S&P 500 in October. By: Stock Market Charlie

October can be a challenging month for stock market performance.

The stock market has experienced a remarkable surge recently, boasting an impressive return of over 35% since the tariff-induced sell-off that took place in April. This substantial rebound has led many investors and market watchers to ponder whether the S&P 500, Nasdaq, and Dow Jones indices will maintain their upward trajectory as we enter the month of October. The anticipation surrounding these indices is palpable, as market participants are keenly aware of the historical patterns associated with October’s performance.

Investors are indeed justified in their curiosity and caution. October has developed a somewhat notorious reputation in the financial world, as it has historically been a month characterized by significant and often dramatic sell-offs. This reputation stems from various market events that have unfolded during this time, leading to heightened anxiety among traders and investors alike.

For instance, one of the most infamous dates in stock market history is October 19, 1987, when the S&P 500 experienced an astonishing and frightening single-day sell-off of 20.5%. This event, often referred to as "Black Monday," sent shockwaves through the financial markets and left a lasting impression on investors. Additionally, during the tumultuous period of the Great Recession in October 2008, the S&P 500 tumbled over 16%, further solidifying the month’s reputation for volatility and market downturns.

Given these historical precedents of major market sell-offs, it is little wonder that investors often feel a sense of unease as the calendar transitions to fall. This sense of trepidation was palpable on Friday, October 10, when the S&P 500 experienced a notable decline of 2.7%, marking its steepest drop since April. This downturn was primarily attributed to the announcement that President Trump had imposed an additional 100% tariff on Chinese imports, effectively reigniting the trade war and raising concerns about the implications for the broader market and economy.

Looking at the historical performance of the S&P 500 during the month of October over the past five years, the numbers tell a mixed story:

2024: -0.99%

2023: -2.20%

2022: 7.99%

2021: 6.91%

2020: -2.77%

These figures highlight the volatility and unpredictability of the market during this month, prompting investors to reflect on their strategies and decisions as they navigate through October.

This brings us to an intriguing trivia question that often piques the interest of market enthusiasts:

What percentage of Octobers since 1950 has the S&P 500 concluded the month with gains?

Select your answer and scroll down to discover the correct response.

Choice 1: 43%

Choice 2: 59%

Choice 3: 67%

Trivia answer: October is indeed prone to shocks, yet it often manages to eek out gains.

If you guessed 59%, congratulations are in order! This statistic reveals that while October can be a month of significant market fluctuations, it also has the potential to produce notable turning points, with losses in the early part of the month sometimes setting the stage for gains later on.

Overall, according to the Stock Trader’s Almanac, the S&P 500 has finished higher in October 59% of the time since 1950, yielding an average return of approximately 0.9%. This performance places October as the seventh-best month for S&P 500 returns historically. However, when compared to other months, the returns in October are relatively modest, especially in contrast to November, which is traditionally the strongest month for the market, with gains occurring 69% of the time and an average return of 1.9%.

It is essential to note that while historical data provides valuable insights, it does not guarantee future performance. As the saying goes, past performance is not indicative of future results, a reminder that investors must remain vigilant and adaptable in their strategies.

OCTOBER IS A GREAT TIME TO BUY

JEFFREY HIRSCH, STOCK TRADER’S ALMANAC 2026

Nevertheless, the historical trends suggest that if the market does experience further declines, such downturns may be short-lived, particularly given that the months of November, December, and January have historically shown strong performance for the S&P 500. This perspective leads many investors to view October pullbacks as potential buying opportunities, capitalizing on the dips before the market rallies.

While the statistical odds appear to favor purchasing during periods of weakness in October, it is important to recognize that there are several headwinds that could impact stock performance this time around.

Currently, the S&P 500 is considered to be richly valued, as evidenced by its price-to-earnings ratio (P/E ratio) of 22.8. This level of valuation historically has been associated with subdued returns, raising concerns among investors about the sustainability of current price levels. Furthermore, the ongoing risk of a re-escalation of the trade war with China poses a significant threat, potentially leading investors to reassess corporate revenue and earnings growth projections. President Trump's imposition of 100% tariffs appears to be a strategic maneuver in negotiations, which could be reversed if an agreement is reached with China's President Xi regarding rare earth exports. However, if the tit-for-tat tariff situation persists, it may result in further declines in stock prices.

Additionally, signs of weakness in the broader economy are beginning to emerge, particularly in employment data. The unemployment rate rose to 4.3% in August, marking the highest level since 2021. While September data remains unavailable due to the government shutdown, preliminary reports from Bank of America and ADP payrolls indicate a potential deterioration in the jobs market for that month.

This economic weakness is a significant factor contributing to the Federal Reserve's decision to cut interest rates by a quarter percentage point in September. Furthermore, it is anticipated that the Fed will implement another quarter-point reduction on October 29, with the CME’s FedWatch tool currently indicating a 98% probability of such a move.

A rate cut generally benefits borrowers and is typically seen as favorable for corporate profits, as it reduces interest expenses. However, if these cuts fail to stimulate sufficient economic growth, the prospect of a slowing economy—and the associated concerns—could present a formidable headwind for further stock market gains in the months ahead.

Best Regards,

Stock Market Charlie